Pakistan’s forex reserves rise by $16m

KARACHI: Pakistan’s foreign exchange reserves held by the central bank increased by $16 million to $9.110 billion in the week ending May 31, the State Bank of Pakistan said on Thursday.

However, the country’s total foreign exchange reserves fell by $100 million to $14.216 billion. The reserves of commercial banks also decreased by $116 million to $5.106 billion.

The SBP’s reserves can now cover around two months of imports.The State Bank of Pakistan (SBP) did not specify the reason for a slight increase in its weekly reserves in its statement. However, analysts believe that it is due to the central bank’s purchase of dollars from the currency market.

The SBP’s reserves have remained stable due to the successful completion of the $3 billion stand-by arrangement with the International Monetary Fund, which concluded in April. The improvement in the external current account, aided by a reduction in the trade deficit and increased remittances, has also supported the forex reserves.

Nevertheless, the government’s main concerns are the high foreign debt repayments and limited financial inflows. The nation faces a $10 billion foreign debt due in June and July 2024, which is putting pressure on government officials to find loan rollovers and secure funding to make timely repayments.

“Pakistan faces a pressing deadline to repay some debt by July 2024, with much of this dependent on debt rollovers. Prime Minister and his team’s frequent visits to Saudi Arabia, the UAE, and China have primarily focused on securing these rollovers, which are crucial for paving the way for the IMF programme,” said Chase Securities in a note.

The SBP in its last analyst briefing held on April 29, stated that repayments for the remainder of FY24 excluding rollover are $1.8 billion, according to an analyst at Topline Securities.

However, for FY25, the SBP preferred to comment by the end of this fiscal year. While, according to the IMF, repayments (amortization) for FY25 are estimated at $14.97 billion, it said.

“We believe heavy repayments of $10.2 billion in June and July 2024 shall have a dominant portion of rollovers,” the analyst said.“To recall, last year in July 2023, the government secured the additional financing of $2 billion from Saudi Arabia and $1 billion from the UAE.

China also rolled over $2.4 billion in Jul 2023. For the differential amount, we will seek clarity from the State Bank and other sources.”Pakistan’s Prime Minister Shehbaz Sharif is on a five-day visit to China. As part of the group headed by Sharif visiting China, Pakistan’s Finance Minister Muhammad Aurangzeb stated that the country was eager to tap into Chinese capital markets due to its economic woes and the need to raise funds from international markets.